Datadog(US:DDOG)2025-11-06 14:02Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $886 million, representing a 28% year-over-year increase and exceeding the high end of guidance [7][22] - Free cash flow was $214 million, with a free cash flow margin of 24% [8][27] - Gross profit was $719 million, resulting in a gross margin of 81.2%, slightly up from 80.9% in the previous quarter [26] - Operating income was $207 million, yielding a 23% operating margin, compared to 20% last quarter [26] Business Line Data and Key Metrics Changes - The number of customers increased to approximately 32,000, up from about 29,200 a year ago [7] - 4,060 customers had an ARR of $100,000 or more, up from 3,490 a year ago, contributing about 89% of ARR [7] - 84% of customers used two or more products, and 54% used four or more products, indicating increased platform adoption [8] Market Data and Key Metrics Changes - AI-native customers represented 12% of revenue, up from 11% last quarter and about 6% a year ago [24] - Year-over-year revenue growth from AI-native customers accelerated, excluding the largest customer [24] - The company saw strong growth across various industries and customer sizes, with new logo annualized bookings more than doubling year-over-year [23] Company Strategy and Development Direction - The company is focused on capitalizing on the long-term growth drivers of digital transformation and cloud migration, while also advancing rapidly in AI [20][21] - A comprehensive set of AI observability products is being developed to address the complexities associated with AI technologies [21] - The company is investing in sales capacity and new go-to-market strategies to target larger and more sophisticated customers [20][23] Management's Comments on Operating Environment and Future Outlook - Management noted a positive demand environment, with strong trends in cloud migration and digital transformation [6][20] - There is confidence in the sustainability of growth drivers, particularly in AI adoption and the performance of new products [74][100] - The company anticipates continued strong performance in Q4, supported by a robust sales pipeline [20][76] Other Important Information - The company has been recognized as a leader in the 2025 Gartner Magic Quadrant for digital experience monitoring [9] - Security ARR growth was in the mid-50% year-over-year, indicating strong demand for security products [10] - The company supports over 1,000 integrations, enhancing its platform's value for customers [14] Q&A Session Summary Question: GPU monetization versus CPU monetization - Management indicated that products for GPU monitoring are being developed but do not yet generate significant revenue [34] Question: Trends in enterprise growth - Management attributed improved performance to a positive demand environment, increased sales capacity, and successful product development [38][40] Question: Nature of AI-native customers - The AI-native customer base includes a variety of companies, from model vendors to coding assistants, indicating broad representation in the space [48] Question: Expansion of contract with largest AI-native customer - Management explained that higher commitments typically lead to better pricing, reflecting a common trend across their customer base [53] Question: Acceleration in security growth - Management noted that investments in channel partnerships and product maturity have contributed to the growth in security offerings [56] Question: Impact of BITS AI on future revenue - Management expressed optimism about BITS AI's potential as a differentiator and revenue contributor, emphasizing its strong market reception [70] Question: Duration of non-AI cohort acceleration - Management feels confident about mid-term and long-term growth, although short-term fluctuations are harder to predict [99]